The International Monetary Fund (IMF) has released its 2026 Article IV Consultation report on Nigeria, painting a picture of an economy that is financially stronger than it was three years ago but still struggling socially. The report essentially confirms what many Nigerians already know: the stabilization phase has largely succeeded, but the country now needs to translate macroeconomic gains into better living standards.
Political Undertones and Opaque Finances
The IMF report is notably political and evasive in its language. It raises concerns about opaque financial arrangements, including off-budget spending and complex government financing. According to the report, the expansionary fiscal stance in 2025 was partly financed by a Central Bank of Nigeria (CBN) deposit drawdown equivalent to 1.1% of GDP, which has similar liquidity effects as previous ways and means financing. Additionally, the estimated savings from fuel subsidy removal (up to 2% of GDP) did not appear to have accrued to the budget in 2025.
The IMF noted a fiscal statistical discrepancy of 2.7% of GDP, suggesting that spending may not have been fully captured in published accounts. Interest payments consumed about 53% of federal revenue, highlighting a significant constraint on public spending. The report also pointed out that Nigeria's consolidated government revenue is only about 10% of GDP, insufficient for the country's development needs.
Positive Indicators and Challenges
On the positive side, Nigeria's external position has improved, with a current-account surplus of 4.8% of GDP and gross reserves rising from $40 billion to $46 billion. This stability is boosting investor confidence and renewing access to international capital markets. Inflation numbers improved in 2025 due to better monetary policy and base effects, but global fuel and food shocks from the Third Gulf War may require tighter policy to prevent a resurgence of inflation.
Despite these gains, the report emphasizes that poverty and food insecurity remain critical issues. The gap between improving macroeconomic indicators and persistent social challenges must be bridged sustainably. The IMF warns that rising poverty and food insecurity could increase pressure for higher public spending ahead of the presidential election, potentially slowing reform momentum.
Need for Expenditure Reforms
The report underscores that inflation is not the main barrier to economic progress; rather, the focus should be on converting macroeconomic stability into tangible improvements in living standards. The Tinubu government has been criticized for ignoring the expenditure side of reforms needed to make the economy more efficient and productive. Pruning government spending is as important as improving tax administration and broadening the tax base.
Ultimately, the IMF's report serves as a reminder that without inclusive growth and fiscal transparency, the political sustainability of the current reforms could come under severe pressure. The challenge for Nigeria is to ensure that macroeconomic gains translate into real benefits for its citizens.
